“The lack of monsoon rains has affected India, for which agriculture still forms a substantial part of the economy. Additionally, the more cautious investor sentiment globally has seen potential investors become more critical of India's policy and infrastructure shortcomings,” the global rating agency said in a broader report on the outlook for South East Asian economies.
Reacting to the cut in growth forecast, C. Rangarajan, chairman of the Prime Minister’s Economic Advisory Council, said S&P's GDP assessment is incorrect, and that growth will pick up in the second half and will be 6.7 per cent this year.
The average rate of growth in the next six years will be 8.2 per cent, Dr Rangarajan said, speaking at an educational institution in Chennai.
S&P had downgraded India's sovereign rating of `BBB-' to negative from stable in April.
The agency has also cut China’s gross domestic product growth forecast to 7.5 per cent from 8 per cent and Japan’s to 2 per cent from 2.5 per cent.
India has seen a spate of downgrades from global investment banks and rating agencies. Immediately after the government announced its first set of reforms, Moody’s said the reforms were too small to affect the country’s sovereign rating.
The Planning Commission also lowered the annual average economic growth rate to 8.2 per cent for the 12th Five Year Plan period (2012-17) from 9 per cent.
India's GDP grew at 5.5 per cent in the June 2012 quarter after declining in eight consecutive quarters.